(By Izabella Kaminska at FT Alphaville)
Olivier Jakob at Petromatrix continues his crusade against the United States Oil Fund in his Tuesday note, an issue increasingly being picked up across the commodities and investment spectrum.
Jakob’s specific case is with the distortions being caused in the WTI market on account of the ETF’s size and predictability. He notes people are already rolling positions from the front-month April contract and into May just to avoid the distortions. This is making the front-month contract somewhat of a farce, with a number of oil traders telling FT Alphaville the contract’s viability as a hedging instrument is truly in question. The volatility, meanwhile, is also immense relative to any other contracts further down the curve.
Full post here.
Barclays Capital, which has a very high-powered commodity research team, has kicked off its coverage of the European oil majors with an aggressively downbeat view of the sector.
The key line: “We believe the oil sector is entering a steeper and longer downturn than either the oil or equity markets imply, and that large-cap oil shares are not as defensive as currently priced.”
On Energy Source:
Mileage tax suggestion flounders
Duetsche Bank warns on EU emissions trading scheme
Demand growth won’t fully recover, says Morse
Two problems that the smart grid doesn’t solve
Security: FedEx’s Fred Smith says oil imports are the biggest US threat, after terrorism and WMDs
Biofuel: Does algae plus wind power equal biofuel?
Technology: Green energy needs to make a big breakthrough, says Chu
Politics: Liveblog of the National Clean Energy Summit featuring Al Gore, Bill Clinton, Nancy Pelosi, T Boone Pickens, Harry Reid, Ken Salazar and more
Emissions: Posh’s horrific carbon footprint
Ethanol: Coming soon: Peru sugar cane ethanol to the US
‘accused’ of being are peak oilists: claim
You don’t say.
There was unsurprisingly a strong reaction to US transport secretary Eric LaHood’s suggestion that the Obama administration could adopt a form of tax per miles driven. The idea was quickly batted away by the White House and roundly criticised by much of the commentariat and blogosphere for being wildly unpopular and reducing incentive to buy more fuel-efficient vehicles (though consultant Geoffrey Styles mounted a defence – or at least argued it should not be dismissed out of hand).
A new 47 page report from Deutsche Bank warns that the credibility of the EU’s emissions trading scheme is at risk ahead of crunch climate change talks taking place later this year in Copenhagen.
The EU ETS is the world’s flagship carbon trading system, and any damage to it would be a serious blow to the EU’s reputation for tackling climate change ahead of the UN talks.
Some contrarian predictions from LCM Commodities analyst Ed Morse, via The National: demand growth will return, but it will be lower than the 1.5 to 1.8% seen in1991 – 2007. His reasoning:
Part of the economist’s argument is based on his observation that every previous oil price spike in the past 60 years has been followed by a lower rate of demand growth. Global demand was growing at 8 per cent annually before the 1973-1974 Arab oil embargo, but declined to just over 4 per cent annual growth in the late 1970s. After the oil price spike resulting from the 1979 Iranian revolution, annual demand growth fell again to just over 2 per cent, and dropped a third time following the 1990 price spike that accompanied the UN embargo on Iraqi and Kuwaiti oil.
His reasoning focuses on supply side matter; quite a constrat to the widespread predictions of a supply crunch:
The recent supply problem that contributed to last year’s record rise in crude prices emerged from the collapse of the upstream oil sectors of Venezuela, Iraq and Nigeria, and the failure of Iran to increase output, Mr Morse contends.
When it realised in 2004 that “state failure” in those countries meant there was a previously unsuspected need to find more oil, Saudi Arabia, the world’s biggest oil exporter, “went on a rapid race to raise production, with results now coming to fruition”, he said.By the end of this year, the kingdom will have 12 million bpd of oil production capacity, about 35 per cent more than its present output.
Infrastructurist has a piece by energy writer William Tucker on the ‘Smart Grid’ and its representation in popular culture – namely by GE, which has been running a striking advertising campaign on a smart grid theme (the scarecrow ad during Superbowl; its Smart Grid landing page is a recurring favourite on Delicious, though this may be due to its impressive Flash). Tucker picks apart the latest television ad:
He has two problems with this.
Energy news headlines from elsewhere:
- Babcock Infrastructure halts shares on Powerco doubts (Bloomberg)
- Papua New Guinea’s Oil Search cuts spending to focus on LNG (Bloomberg)
- Korea and Iraq agree $3.55bn oil development deal (Reuters)
- Woodside finds more gas near Australia Pluto field (Reuters)
- Governors’ coalition asks Obama to support promotion of biofuels (Platts)
- China mine blast may boost coal prices (WSJ)
- US ethanol production to hit ‘excess’ of 10bn gallons in 2009 (Platts)
Energy news from the FT:
- EU in dispute about project financing
Discord on where and how to spend funds on energy
- Vattenfall agrees €8.5bn cash offer for Nuon
Swedish group aims to expand north of Alps
- Chile’s state energy company loses $958m in 2008
Enap hit by fall in value of oil inventory
- Expansion of gas storage in UK under threat
Industry urges Treasury to clarify tax treatment of storage
- Novera waits on wind power as results disappoint
Energy producer relies on landfill gas
- EDF and Enel plan Italy’s nuclear revival
‘National champions’ to relaunch industry after 22-year hiatus